Future Investment Fund for modern infrastructure

Schools, health, science and
innovation, and transport all benefit in Budget 2012 from
the Future Investment Fund set up to invest proceeds from
the sale of minority shareholdings in four SOEs and Air New
Zealand, Finance Minister Bill English says.

"The
Government is committed to investing in modern
infrastructure that helps build a faster-growing economy
with more exports and more real jobs, without borrowing more
from overseas lenders,” Mr English says.

“That’s
precisely what the partial sale of shares is all about. The
Treasury is forecasting sale proceeds of $5 billion to $7
billion over the next three to five years.

“That
money will go into the Future Investment Fund and be used to
pay for better public assets such as modern schools,
hospitals, and transport infrastructure, while reducing the
Government’s borrowing by $5 billion to $7 billion.”

Budget 2012 allocates an initial $558.8 million,
including:

· The first $33.8 million of $1
billion ring-fenced for modernising and transforming New
Zealand schools as part of the Government’s 21st Century
Schools programme. More of this money will be allocated in
future Budgets, after a review of school property
management.

· A further $250 million towards the
KiwiRail Turnaround Plan.

· $88.1 million for the
health sector, most of which will go towards hospital
redevelopments.

· $76.1 million for the creation
of the new Advanced Technology Institute.

The fund is
notional, like the Canterbury Earthquake Recovery Fund.
Spending and receipts will be smoothed over the fund’s
lifetime.

“Investing the share sale proceeds in this
way will result in valuable assets that are owned by the
Crown, as part of a growing asset pool, on behalf of all New
Zealanders,” Mr English says.

“The SOE share sale
programme is a win-win. New Zealand savers get to invest in
large Kiwi companies, and the Government frees up $5 billion
to $7 billion to buy new assets without extra borrowing.

“Being listed on the stock exchange will provide
greater transparency and discipline for the companies.”

The Government has confirmed Mighty River Power will be
the first energy SOE to be partially floated – likely to
be in the third quarter of this year, subject to market
conditions.

The other companies in the share offer
programme are Genesis, Meridian, Solid Energy, and Air New
Zealand.

“The Government expects 85 to 90 per cent
New Zealand ownership after the partial share floats,
including the Government’s commitment to retain a
controlling stake of at least 51 per cent in each
company,” Mr English says.

“Details of the
structure of the Mighty River Power initial public offer and
share allocation will be announced after legislation is
passed later this year.”

The $558.8 million
allocated from the fund in Budget 2012 builds on $4.3
billion of new infrastructure spending over the past three
Budgets for projects such as schools and ultra-fast
broadband, and billions of dollars more to pay for the
Government’s share of rebuilding Christchurch.

In
addition to Budget initiatives, the Government is investing
about $12 billion over the next 10 years to improve the
State highway network and $4.6 billion through Transpower
over the next 10 years to upgrade the national grid.

“Well-targeted investment in infrastructure helps lift
productivity which, over time, will mean better wages and
higher living standards for New Zealand families,” Mr
English says. “The Government’s large investment is also
directly supporting thousands of jobs – and indirectly
supporting many thousands more.”

Pre-Prospectus
DisclaimerThe Crown is considering offering shares to
the public in one or more of Genesis Power Limited, Meridian
Energy Limited, Mighty River Power Limited, Solid Energy New
Zealand Limited and Air New Zealand Limited. No money is
currently being sought and no applications for shares will
be accepted or money received until after an investment
statement containing information about the relevant offer of
shares is available.

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